The paper "Current Share Price and the Earnings Yield" is a perfect example of a finance and accounting assignment. Synergy may be defined as the strong hope of there being a lot of financial benefits when two or more firms either merge or one firm takes over the other(s). This belief has always led to the misconception that any two firms merging or one taking over the other leads to an almost automatic financial performance of the resultant merger. The existence of synergy in a merger or takeover can be attributed to quite a number of factors.
Some of these factors include the possibility of reducing costs collectively, the combination of both skills and capabilities, and the likelihood of increased revenues. It is indeed a fact that when two or more firms merge or when one acquires the other; the revenues of the resultant outfit have higher chances of behind high. This tendency explains why there may be synergy when one company merges with another or one firm acquires another. In actual sense, when companies merge, their revenue streams are combined so as to make the resultant revenue stream higher than the original. The other reason for synergy existence in mergers and takeovers is the tendency of technology and skills to be combined in mergers and acquisitions.
In these resultant firms, the skills of the resources in the respective former firms are in most cases transferred to the merger and acquisition. This boosts the skills available in the merge and acquisition. Similarly, the technologies employed in the former individual firms are easily transferrable into the resultant company outfit thereby making the processes there more technologically efficient.
This definitely boosts the productivity of the company. Finally, in mergers and takeovers, there is the obvious benefit of redundant processes and resources being ironed out so that a significant reduction of costs is achieved by the merger and acquisition. The ultimate result is an efficient company that can give value to shareholders.
ReferencePeirson, G., et al, Business Finance(12th Edition), McGraw-Hill Australia.